Malcolm Turnbull (Wentworth, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

The Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008, the Financial Claims Scheme (ADIs) Levy Bill 2008 and the Financial Claims Scheme (General Insurers) Levy Bill 2008 introduce a new Financial Claims Scheme, including a three-year 100 per cent guarantee of deposits in authorised deposit-taking institutions, compensation to eligible policyholders with claims against a failed general insurance company and provisions to strengthen the ability of the Australian Prudential Regulation Authority, APRA, to deal with distressed or failing financial institutions that it regulates. The Financial Claims Scheme has been in the process of being created for some time, with consideration by the Council of Financial Regulators, including the Treasury, the Reserve Bank, APRA and ASIC, as well as the Financial Stability Forum. In 2003, the coalition commissioned Professor Kevin Davis to undertake a study of deposit guarantees, which was published in March 2004 as The study of financial system guarantees.

As the House is aware, the arguments for and against deposit guarantees are finely balanced. On the one hand, it can be considered that the guarantee will affect competition and may increase moral hazard. On the other hand, it was clear, as Professor Davis reported, that many Australians thought there was, in any event, an explicit guarantee in place or otherwise thought that there was an implicit guarantee that would be called upon in the event of an institution failing. As I have said many times, Australia’s financial system is very strong, and our depositors and insurance policyholders enjoy preference under the Banking Act and the Insurance Act.

The reforms introduced by the coalition following the Wallis inquiry, to create APRA and ASIC, have been of considerable importance to ensuring the strength and stability of our financial sector during the present global financial crisis that originated with subprime loans in the United States. Essentially, what happened in the United States was that an incredible quantity, amounting now to 15 per cent of the entire mortgage book in the United States, was lent in the form of subprime loans—that is, to people whose prospects of repaying the loan were, at best, poor. This whole process, this incredible exercise in imprudent lending, depended, of course, upon a housing bubble and, indeed, fuelled that housing bubble. Bubbles invariably burst and, when this one burst, these loans became bad loans. In the meantime, many of them had been securitised, often into very complex financial instruments, which made their analysis extremely difficult. You had the combination of imprudent lending and considerable complexity. These derivatives found their way onto the books of hundreds of banks around the world. There was a combination of distressed assets—distressed derivatives, if you like—which were difficult to analyse and a falling property market in the United States. The housing market in the United States has fallen from its peak, I might note, on average, in real terms, by more than 20 per cent. Most analysts expect it to fall by more than 30 per cent, so this is a very, very serious correction decline in property values.

All of that resulted in a crisis of confidence. Banks lost confidence in each other. They were unwilling to lend to each other, and liquidity started to dry up. As a result, of course, central banks initially, and then governments, have had to step in to reinstate confidence and to provide liquidity to make sure that banks have the money to continue funding their operations. It has been an extraordinary crisis, and its implications and consequences will not be fully appreciated by any of us, I imagine, for some considerable time. The protection of systemically important deposit-taking institutions and insurance companies is absolutely vital to maintaining the confidence in our financial system. Confidence is everything. When confidence fails, so does credit. Everything depends on confidence. That lack of liquidity affects even well-run financial institutions, such as Australian banks, because it has made the cost of money higher. It has made money, in effect, dearer and less available. That, of course, impacts directly on businesses small and large, on homeowners, on every Australian. The crisis may have originated in Wall Street, but the rubber has hit the road and hit it very hard on Main Street right around the world.

On 2 June this year, the Treasurer announced that the government intended to legislate for a scheme which would enable depositors in a failed ADI to receive within weeks, he said, a refund of their deposit with that institution up to a limit of $20,000. The scheme would cover checking deposits, savings deposits and term deposits and would cover banks, building societies and credit unions—the ADIs regulated by APRA. Any deposit protection scheme, as we know, raises issues of moral hazard, and there have been some very unedifying experiences in the past. All of us remember the experience of the savings and loan collapse in the United States in the late 80s and early 90s, where institutions were basically given free rein as to the type of investments they undertook but nonetheless benefited from a very substantial depositor guarantee. This had the effect, in the market at the time, of encouraging risky behaviour. They offered high rates of interest to attract deposits and invested in high-yielding but risky investments. The inevitable happened; there was a collapse and the United States government, through the FDIC, had to pick up the tab and then, through the Resolution Trust Corporation, take over the assets and work them out.

There are many similarities between the events with the S&Ls and what is happening in the United States today. It is a different situation in other respects but it just underlines the importance of maintaining prudential supervision at all times. There is no substitute for prudent management of financial institutions. That is the absolute touchstone. The ramifications of this crisis globally have been extremely complex and, as I said, the implications and consequences will not be known by any of us for some considerable time. But its origins were very simple. It originated in poor lending practices, lending money to people who were not able to repay the loan—a practice that was only able to continue as long as a bubble, which is obviously unsustainable.

As we noted last Friday, on 10 October, in this current economic climate the $20,000 limit should be increased. The shadow Treasurer and I recommended that it should be increased to at least $100,000. This legislation provides for an unlimited deposit guarantee and we fully support it. The unlimited guarantee for bank deposits runs until 12 October 2011, with a likely introduction of a cap at that time. The legislation also provides full protection for claims against insurance companies less any excess or deductible amounts. These measures are important to maintain and build confidence in our financial sector. While we recognise the great strength of the Australian financial sector, we also must recognise that the global financial crisis is affecting confidence in financial institutions which are otherwise sound and solvent.

However, we do recognise—and I have given an example of this problem with moral hazard—the potential additional moral hazard from the introduction of any scheme of this kind. It is a central issue and it is one that should not be overlooked. So we support the review of the scheme in three years. We recommended in our statement last week that that be done by the Productivity Commission, and we commend that to the government. APRA has the key role to intensively supervise deposit-taking institutions and insurance companies that benefit from this government guarantee. It is APRA that is best placed to mitigate the additional moral hazard from the new measures. That is why we also support the additional powers given to APRA under the legislation which will enable it to move rapidly to protect deposit holders’ and insurance holders’ funds and so protect the taxpayer that otherwise underwrites the scheme.

The coalition also supports the levy part of the scheme that ensures that the first port of call to pay the deposit holders of a failing ADI is that ADI’s capital, bearing in mind that in any event under the existing legislation the deposit holders have first priority. It is highly likely, almost certain, that in the unlikely event of a failure there would be more than enough assets for depositors. After the ADI’s capital comes the levy on other ADIs, with the taxpayer providing funding for the temporary period to ensure the rapid payout of depositors and insurance policy claimants. We recognise that the scheme may have unintended consequences, and we will carefully monitor the effects of the scheme and liaise with the government where it is feasible to resolve those unintended consequences.

I note that there have been some rather scornful remarks from the government benches today about our call for a bipartisan approach to the response to the global financial crisis. We made that offer sincerely and, as the Treasurer knows—he and I had very frank and private conversations about the $20,000 cap when it was first introduced—we stand ready to continue to provide assistance to the government on designing these measures which are very important and which, without walking away from our obligations and our duty to hold the government to account, deserve to have bipartisan support.

This legislation does not deal with the proposal to provide government guarantees for wholesale term funding for Australian banks—and it may be that legislation is not required; I do not believe the government has finalised a view on this yet. That is a very different proposition entirely. Depositor protection of the kind we are talking about with this legislation is commonplace and in fact most countries have it in one form or another. The wholesale term funding guarantee is a product of this particular economic crisis and it has been made available in different ways in a number of countries. But it gives rise to very major issues relating to the protection of the taxpayer. We cannot allow the guarantees offered to banks in respect of wholesale term funding, enormous sums of money borrowed from international markets, to result in losses by banks being transferred to the account of the taxpayer. The protection of the taxpayer is absolutely vital.

We have sought information from the Prime Minister and the Treasurer in question time about that. We have asked questions about whether there will be any additional prudential supervision requirements. What will be the conditions of providing a guarantee of this kind? The Prime Minister could have either provided us with a substantive answer or simply said, ‘We are still working on the detail.’ Instead, we got an outburst of indignation. The simple fact is that protecting the interests of taxpayers is a key priority—many would say the key priority—of this parliament and this House. The scornful and indignant way in which the government has responded to legitimate questions about these matters says a great deal about the contemptuous way they are treating those Australians, both within this House and outside it, who seek some accountability and transparency.

The wholesale term guarantee must be structured in such a way that there is an exit plan because, as I believe John Stewart, the chief executive of the NAB, said only a few days ago, the real challenge will not be in getting banks to apply for these guarantees and to pay the fee. And, of course, the determination of the fee is a critical issue. The real challenge will be getting them off it. I think Mr Stewart described it as getting them off the government teat. That is a major issue, because we do not want to get into a situation in which unsustainable practices by banks are in effect supported and continued by virtue of a Commonwealth government guarantee. It is fine for the Prime Minister to say that APRA will keep an eye on it. APRA, as he should know very well, is not constituted to act as an investment advisor for the Commonwealth of Australia. When the Commonwealth gives a guarantee of this kind, it is on the hook. It is taking on board very substantial contingent liabilities. It can charge a fee. It should charge a fee, and the fee should be very commercial. Nonetheless, it is taking on considerable risk and that is something that will need additional, heightened and very careful supervision.

In the UK, where a similar proposal is being put in place, I was advised by one of the UK bank chief executives here recently that one of the conditions is to demand the provision of additional capital. We have asked the Prime Minister about that, and we have had no answer. But it is vital that the government satisfy Australians that, in providing these guarantees, the interest of taxpayers will be protected. It is not acceptable to rush into a scheme that will result in bank losses becoming losses of the Commonwealth government and being debited to the account of the Australian taxpayer.

That is why it is important that the parliament, the government and the opposition are able to agree on the principles that should underline this extraordinary intervention. As I said to the House yesterday, I wrote to the Prime Minister on Monday and invited him to agree to a motion that would have the support of both sides of the House that set out the principles that we would all agree on in respect of responses to this crisis. I will not repeat the whole of the motion here, because I read it into the Hansard yesterday. But the five key elements are worthy of repeating. The first was that we recognise the need for an urgent and coordinated international approach to the current financial crisis. The second was that the interventions be temporary until such time as confidence has been restored in global financial matters—in other words, they must not just be temporary but there must be an exit strategy. How is the government going to stop providing these guarantees? There has to be a clear exit strategy. The third was that the interventions—the guarantees and so on—must not facilitate imprudent behaviour of the kind that I described earlier that would disadvantage Australian business and Australian consumers. The fourth was that the interventions should not diminish competition in the provision of financial services to business and consumers across Australia. The final one was that above all it should not facilitate a transfer of losses from the private sector to the taxpayer.

There have been a number of very significant announcements made, such as deposit guarantees, wholesale term funding guarantees and the $10.4 billion stimulus package announced by the Prime Minister yesterday. We have given bipartisan support to these and we have offered to assist and to engage with the government in a way that would enable us to be fully informed of each other’s views. We have offered to work together in a way that the Australian people would like to see us do. Our offer of bipartisan engagement and cooperation has been rebuffed scornfully by the Prime Minister.

We saw today the most extraordinary spectacle. The opposition did its job, asked important questions about important issues relating to $10.4 billion spend by the Commonwealth government and asked questions about the economic forecasts on which it was based. It took three questions before the Prime Minister volunteered that the growth forecast upon which it was based had a two in front of it. He was not even prepared to give us a figure. So it is two per cent or more, no doubt. Why did we have to tear that out of him? It is like drawing blood from a stone.

He is so reluctant to tell the House the facts. He goes on television and says that he wants to level with the Australian people, and when you ask fundamental questions, such as, ‘Has the advice been that this would put upward pressure or downward pressure on inflation and interest rates?’, those questions are brushed aside. We asked important questions about the economic forecasts, which are everything. Why has the government chosen to spend $10.4 billion in this way? This is a very large stimulus. It is, as we know, one per cent of GDP. And we are taking the government on trust in these difficult times. We are trusting the government to get it right and not undertake a measure that will have adverse economic consequences. And when we seek to hold the government to account, we get nothing more than abuse, indignation and contemptuous scorn.

Perhaps the height of it and the most ironic response we had from the Prime Minister was yesterday in another tirade against the opposition simply trying to do our job when he said that we were less responsible than the government of Cuba. You would have to go to Cuba to find a Prime Minister who levelled less with his own parliament than this one.

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

I rise today to support the cognate bills before the House, which include the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008, the Financial Claims Scheme (ADIs) Levy Bill 2008 and the Financial Claims Scheme (General Insurers) Levy Bill 2008. I intend to take the opportunity in this debate to first of all identify the details of the bills before us and their significance and then to put them within the context of the reason for their introduction into the House.

The bill covers the deposit guarantee, it establishes the Financial Claims Scheme, which will be unlimited for the first three years, and it enhances the powers of APRA to manage distressed financial institutions. Last Sunday the Prime Minister announced that the government would guarantee all bank deposits in Australian banks, Australian subsidiaries of foreign owned banks, credit unions and building societies. The guarantee covers all bank deposits, whatever their size, in all Australian banking institutions for the next three years. Any type of deposit, savings or cheque account or term deposit is guaranteed, including deposits held in any currency. Australian regulators advise the government that Australian deposits covered by the guarantee are estimated to be around $800 million. The move to guarantee deposits places Australian banks on the same footing as other banking systems around the world in the current circumstances. It should be emphasised that the government has been advised by regulators that Australian banks remain sound, profitable and well capitalised. The four largest Australian banks have very high ratings internationally.

Deposit-taking institutions are required to hold sufficient capital against their deposit liabilities. In the unlikely event of the failure of an Australian financial institution, depositor preference has always ensured that depositors have first call on an institution’s assets. No depositor of an institution supervised by APRA, or by the RBA before it, has ever lost money. The government does not expect that it will be called upon to pay out on the guarantee. However, there has been community concern at the international events they see unfolding nightly on the news, and the government is keen to ensure strong community confidence in Australian banking institutions. It is for this reason that the issue of the guarantee and the establishment of the FCS have become necessary.

The government has also announced a guarantee by application of term wholesale funding by Australian banks. The government has undertaken this initiative to ensure that Australian banks are not disadvantaged in accessing global wholesale capital markets. A guarantee will only be applied to individual transactions following an application by an institution and receipt of a fee. The government has been careful to guard against the consequences of encouraging risky behaviour, charging an insurance premium or fee for those institutions applying to take up the guarantee on term wholesale funding. The fee ensures that taxpayers receive compensation for guaranteeing wholesale funding and that institutions applying to take advantage of the guarantee pay for the benefit of that guarantee. The fee will be structured to act as a disincentive for institutions to continue using the guarantee once conditions in capital markets return to normal.

We find ourselves in quite unprecedented times. I reflect back a bit over 12 months to August last year, when I was deputy chair of the House of Representatives Standing Committee on Economics, Finance and Public Administration. A couple of weeks earlier, while we were meeting with the Reserve Bank governor in Western Australia, there were reports on the international news channels about some problems occurring in the subprime mortgage sector in the United States. At that point, it was seen to be a contained and not particularly threatening development, although it obviously had severe implications for those who were affected by it in the United States. As a result of some of those reports, it was decided by the committee to have a one-day roundtable on Australian house mortgages and the situation in this country and to generally have a look at the implications for Australia of what was unfolding in America.

What is particularly interesting for me is that, now we are a bit over 12 months down the track, it is quite astounding that the evidence we took at that roundtable on that day has proven to be so profoundly unreliable. The reality is clearly that very few if any major commentators, economists or people working in the field or with the regulators around the world in any way anticipated the hidden, intricate connections between what was happening with the subprime market in America and the broader international economic world. Sadly, whilst I am sure we have not completely unfolded the implications and exposed them to the light, today we have a much better and more devastating understanding of those connections and their effects.

At that roundtable we had the four major banks; the regulators; the mortgage insurers; a variety of independent economists, including Associate Professor Steve Keen; and the union, the FSU. The general view from most of those—Associate Professor Keen probably being the outstanding exception at the time—was that Australia was unlikely to see any particular flow-on effects from the subprime mortgage issue. I think that was really a very limited view of what the flow-on effects might be, because it was about the nature of our mortgage market and the fact that subprime mortgages were such a tiny percentage of our market and that our defaults were at good rates so that the defaults were not emerging as a major problem, although there was an acknowledgement that within specified markets or geographical areas there was a greater problem than in others—and Western Sydney obviously comes to mind; my colleague the member for Bankstown, particularly, has been engaging with the problem in his community in recent times.

However, there were assurances that the risk assessment behind the insurance of these products was sound and that the ratings and regulations were appropriate. I think that that remains the case. There is no doubt that in Australia we have a well regulated, well capitalised and, I would say, responsible banking sector. However, what was not seen at that time—and was probably not seen internationally at that time—was the way in which these products were dodgy at best and basically reliant on an ever-expanding house price market so that it was okay to lend something to someone regardless of their capacity to repay it because at the end of the day the lender could always repossess the house and sell it for a profit anyway. The very nature of the economics of that sort of loan, despite its morality, was that it then became a contagious, viral reality in our economy internationally.

These products were packaged up and sold out, often with regulators giving them good credit ratings that encouraged people to think that they were safe investments, so they spread throughout the system. As the Prime Minister indicated in his speech today at the Press Club, it was not until that crunch time came, where there was a major failure in that whole system, and people started handing back the keys in those parts of America where the subprime crisis started to hit, that the tidal wave—or the tsunami, as the former Treasurer, the member for Higgins, described it not long before the election last year—began to flow through. Now, at the end of the day, we are all paying a price for that. It is important that we understand that, while we are in a much stronger position in Australia than in most other developed countries—as has often been said by many in this place, if you had to choose one of the countries amongst the developed nations in which to be weathering this storm, Australia would be your No. 1 choice—we are not immune from the flow-on effects.

One of the most critical effects is the psychology of this sort of event, and that goes to the issues around confidence. I mentioned earlier this week that the major impact in my electorate that I have seen as a result of this in recent days has been the number of people ringing our office who were concerned about the safety of their bank deposits. As much as we can assure people of the strength and resilience of our sector and the quality of our regulators, if people in this country are watching, night after night, TV news about countries internationally providing guarantees to their banks and deposit-taking institutions, they will say, ‘Why haven’t we got that protection as well?’ If you do not provide confidence, it will flow through to behaviours in our real economy. It means that people will get so spooked by what is happening that they will stop spending and will no longer feel secure to invest. Sadly, in the worst cases, people even start pulling their money out of banks and deposit-taking institutions, and that is exactly the sorts of behaviours and reactions we do not want to occur in this country. So the announcement that the Prime Minister made on Sunday about the guarantee behind deposit-taking institutions in this country was very, very important in order that people could have that confidence.

It is also important that we recognise that the credit squeeze internationally has made it increasingly difficult for banks, no matter how well regulated and well capitalised they are, to compete for finances on the international market. I was talking to some locals and reminding them that, when we bought our first house in 1984, we had to basically bow and scrape to the bank manager to get a loan to buy it. The current generation just cannot imagine that. They now have the experience—which we raised with the banks at the roundtable in August last year—of being told, ‘Surely that’s not enough; surely you want more money,’ and of walking away and thinking, ‘I can’t believe that I’d actually be able to borrow that much.’ That is the reality of this generation’s experience, so I think it is hard for many of them to picture what it was like in the days when credit was so tight that you had to basically mortgage your soul, let alone your income, to get a mortgage to buy a home. We certainly do not want to get to the point where the credit squeeze is so bad and our banks are unable to compete on the international market for accessing credit that we get to the point where that occurs again.

The importance, therefore, of the guarantee is also to make sure that our banks are competitive on the international market. One of the most important messages that the Treasurer has brought back from his meetings is the need for countries to act in unison, to act in a way in which no one nation takes action that disadvantages another. With countries internationally providing these guarantees, it is important that we reflect that in this country as well, which is what these bills are about. I commend the bills to the House.

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

The financial crisis that has been unfolding in the United States since around August 2007 has certainly sent shock waves around the world, and the alarm bells have rung on a number of occasions in relation to the banking sector of other countries. The collapse of Northern Rock, the collapse of Bear Stearns in March this year, the acquisition of investment banks in the United States such that there are now only two remaining investment banks on Wall Street and the partial nationalisation of banks in the United Kingdom, in Europe and, overnight, in the United States mean that these are indeed unprecedented times. The steep falls in stock markets have dominated the front pages of our newspapers, and it is on the minds of many Australians.

We do not know the extent of the financial losses that have already occurred and we cannot know accurately the full extent of future losses, but we do know that a loss of confidence has contributed to the financial crisis around the world and that rebuilding confidence is a crucial part of recovering from the crisis. In advanced countries governments are relying essentially on three lines of defence to shore up their economies from the impact of the financial crisis: monetary policy—and some countries have more manoeuvrability in that regard than in others; fiscal policy—and, again, some countries are in a rather difficult position depending upon the strength or otherwise of their budget, their surplus position and their economy generally; and also direct government intervention that has taken the form of liquidity injections, purchasing the troubled assets of some banks and exposing their balance sheets, if you like, and also the issue of recapitalisation. In advanced economies governments are also putting in place deposit guarantees. The International Monetary Fund, in particular, has been calling for greater coverage not only for retail bank deposits but also for interbank and money market deposits.

These bills, the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008, the Financial Claims Scheme (ADIs) Levy Bill 2008 and the Financial Claims Scheme (General Insurers) Levy Bill 2008, in order to establish a financial claims scheme, provide an unlimited explicit guarantee for bank deposits. It is probably fair to say that most people in Australia assumed that there was already in place at least an implicit guarantee of their bank deposits, particularly with the major banks. But these bills contain important measures to maintain and build confidence in Australia’s financial system.

Australia does have a depositor protection scheme in place whereby authorised deposit-taking institutions must have in place assets held in Australia equal to or more than the deposit liabilities that they have. Depositors in this country also have first claim to the assets of an authorised deposit-taking institution. But in these unprecedented times greater assurance is required, particularly to assure depositors with institutions other than the big four that their deposits are safe, because authorised deposit-taking institutions include building societies, credit unions and the like.

Australia is in a far better position than many other countries to withstand the shocks from the financial crisis. Our financial system is safer than many and we are therefore better prepared than most other countries to withstand the financial crisis. This is not the result of luck. It in fact reflects over 10 years of responsible economic management and the application of measured financial principles by the previous government.

Australia’s financial institutions have served us well and are serving us well at this time. The Reserve Bank is keeping its eye on inflation and providing systemic stability to our entire financial system. The Australian Prudential Regulation Authority, which was set up in 1998 as a result of the Wallis inquiry recommendations, provides the type of intense supervision that perhaps has been missing from some systems overseas. That supervision is of systematically important institutions such as authorised deposit-taking institutions and life and general insurance companies. The Australian Securities and Investments Commission is providing careful oversight of corporate law. It has been called upon to act, particularly in relation to the issue of short selling, during the extraordinary month of September. And of course the Australian Treasury oversees policy. So these institutions are interacting and coordinating to ensure our economy has strong prudential regulation and supervision, and their roles are complemented by the Australian Competition and Consumer Commission to ensure that there is promotion of competition policy, enhancing competition, which is essential for the provision of the best quality goods and services at the lowest prices in this country.

The point is that these are institutions that, in the case of APRA, were created by, or in the case of the others, had their mandates strengthened by the coalition when in government. These bills will be competently administered by one of these institutions—the Australian Prudential Regulation Authority. In the highly unlikely event that an Australian institution collapses, these bills will provide depositors with the security that their funds will be available to them in a short period of time. The guarantee will apply for three years to all deposits in authorised deposit-taking institutions. The scheme will also provide compensation to eligible policyholders of general insurance in the event of a failure by a general insurance provider. Finally, the bills strengthen APRA’s ability to manage a distressed authorised deposit-taking institution, a general insurer or life insurer, should that be required. In addition, the two related bills provide for the imposition of a levy on authorised deposit-taking institutions and on general insurers in the event of the activation of the financial claims scheme in relation to the failure of an ADI or general insurer.

But there are risks with these bills that must be addressed by the government. While the coalition supports the bills, we also recognise that there are risks in providing such a guarantee to depositors. As with all areas of government, the bills will require careful analysis and prudent management once they have passed into law.

While the bills before us have been under consideration for some months, the idea of a financial claims scheme is now considerably changed in scope from the original capped scheme which proposed a limited explicit guarantee of $20,000. It was more about timely access to at least some funds in the event of a failure to meet deposit liabilities rather than ensuring that the entire deposit was covered and available in a short time. I think the government should be upfront and acknowledge that the speed with which these greatly changed bills have been brought forward necessarily means that the analysis available to the government for decision making has been hurried. The opposition has had even less information and less time to consider that information than the government and so there are a number of unanswered questions. I am grateful for the briefing from representatives of Treasury and the government today, but there are a number of issues which will need to be watched very closely. The public and those financial institutions that are affected by these bills, both those that are included and more particularly those that are excluded from its coverage, are largely in a position of just having to trust the government on this one.

I also raised today in this House during the matter of public importance the significance and the importance of having the government level with the Australian people and provide publicly and through this House a full statement of the information and analysis that the government has received on the important decisions that it has been taking over the past couple of days. I refer, of course, to the $10.4 billion package that has been designed to act as a fiscal stimulus for the Australian economy. There is a dearth of information surrounding the announcement of that package. There was a press release and a statement by the Prime Minister, but there are no Treasury papers, no Treasury advice and no revised forecasts—all the usual advice, data and information that one would expect to see supporting the announcement of a $10.4 billion spend. This is effectively going to halve the budget surplus and yet such information is absent. When the coalition asked quite legitimate questions in the House about the revised economic forecasts and the information that the government must have had in order to have made such an extraordinary announcement as a $10.4 billion package, there was just confected outrage that the opposition should be so impudent as to ask these questions. That just causes more concerns in the minds of the public.

These three bills are no exception. They have not been subjected to the normal scrutiny. There is no regulatory impact statement. The government should prepare a clear statement of the costs and benefits and risks of this policy to government, to the financial sector, to businesses and to the public. In such a statement it is essential that the government recognises that this scheme will alter behaviours by creating new incentives and disincentives to authorised deposit-taking institutions and insurers and their customers to act in ways different than they have in the past. Analysis and effective supervision by government will be required so that the increased risks from the moral hazard are minimised. The government has set an expiry date of three years for this scheme to operate without a cap—that is, an unlimited, explicit guarantee for deposits. To achieve this—that is, to set an expiry date of three years for the scheme to operate without a cap—there must be a credible and workable exit strategy. It should be devised now and then reviewed at appropriate intervals between now and the expiry date. There is currently no exit strategy.

I note that the Treasurer’s second reading speech this morning stated that there was interaction between the guarantee on deposits in these bills and the guarantee on eligible wholesale borrowing. He said there was ‘interaction’ there, but at this stage virtually no information has been provided on the government’s wholesale term-funding guarantee. There is virtually no information about that. And, again, I call on the government to make such information available.

The coalition understands the need for a concerted effort to ensure Australia withstands the impact of the financial crisis. But the coalition, like the Australian public, should not be left in the dark, left wondering what information the government has that has led it to make these decisions. We will support these bills, but the government must provide this information to the coalition and to the Australian public.

A government should always be wary of adding new laws that are unnecessary or counterproductive. The present financial crisis is, to some extent, a result of poor regulation in the past in various parts of the world. Once a new law is introduced, a government should continue to monitor its effectiveness, its efficiency and its fairness. This is particularly so where a law has been introduced in great haste or in circumstances where none of the normal scrutiny is applied or no regulatory impact statement is provided. In the case of financial regulation, it may be that the immediate circumstances of the present problems are leading to solutions which are not fundamental to improving the workings of financial markets. Many analysts believe that better disclosure of debt is the fundamental requirement for addressing the present problems around the world. That means that banks and corporations and others who have invested in the subprime market would have to declare their level of exposure to current and future losses. It would prevent debts from being hidden off balance sheets.

Inevitably, there will be some financial institutions that will be revealed as insolvent around the world. They may well need to be recapitalised. But in the absence of transparency, even the huge bailout packages in the United States and the United Kingdom will fail to stop the crisis or to restore trust to the financial markets. There must be absolute transparency. In response, many governments, including Australia’s government, are offering these deposit guarantees as an interim step on the way to recovery. We understand that. But it is to be hoped that the world does find a way through this crisis that results in minimal damage to the world economy. It is possible that no circuit-breaker will be found unless the reporting rules are reformed to achieve full disclosure of all balance sheet assets and liabilities.

So our caution, our suggestion to the government, is that whilst we support these bills there are still many matters that need greater consideration, more information. Take the Australian public with you. Level with the Australian public. Give us the detail, the information that we need to be assured that this level of regulation and these bills will achieve the desired effect.

Craig Thomson (Dobell, Australian Labor Party) Share this | Link to this | Hansard source

We are indeed in uncharted waters in terms of the financial crisis that is gripping the world. What the Australian public has been looking for, and what the Rudd government has delivered, are bold and decisive actions on a number of points. The Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008 and cognate bills before the parliament today are part of that. On 12 October the Prime Minister announced three strategies to help protect Australians and the deposits of Australians and inject confidence back into the financial system. Those three measures that were announced on 12 October were the uncapped guarantee on deposits for the next three years; a guarantee of wholesale term-funding of Australian incorporated banks and other authorised deposit-taking institutions, and this guarantee must be applied by the borrowing institution and is subject to the payment of a fee; and also the authorisation for the Australian Office of Financial Management to purchase additional RMBSs for a total of $8 billion. It was then followed up two days later with a $10.4 billion package to help stimulate the economy. All of these measures need to be taken together when we are considering the legislation today and looking at the decisive action that this government has taken.

I was out in my electorate over the weekend and there was considerable concern from the public who were coming up to talk to me about their issues. The majority of people who were coming to talk to me were worried about their deposits. They were worried about what was going to happen to them. They had had them for many years in banks and they were looking to see what the government could do in relation to this issue. Now this is something that the government has been mindful of for some time. In fact, in June this year we announced the intention for this legislation—at that stage to be capped at $20,000, but there was an intention by this government to make sure that there was some guarantee for deposits. The events that have gripped the world’s financial markets saw a need for us to take those guarantees further, and that is what this legislation is about.

The other point about the approach that this government has taken is that it makes sure that we are working internationally with other governments. This is an international crisis and there needs to be cooperation and coordination with banks and governments around the world to work it out. Again, this government was decisive in doing that. The Treasurer was on a plane straight over to the United States to participate in very important meetings to make sure that we were part of the international solution to these particular problems.

It was only a couple of weeks ago that the Prime Minister was in New York and those opposite were mocking the fact that he was taking the financial meltdown so seriously that he needed to be in the United States. Two weeks later and we do not hear a squeak out of them about the action that the Prime Minister took in making sure that he was over there, across these issues and talking to government and financial institutions about the effects that this would have on the global community.

This legislation is about trying to make sure that confidence in the Australian financial system is restored. It is there because it is so important for the operation of our system that people do not fear—and in the case of Australia there is no need to fear—that their bank deposits are not safe. Indeed, it is still the case that our banks are strong, well capitalised and some of the safest banks in the world. But we need to make sure that we take strong and decisive measures to restore confidence, and the bills that are before the House go to that.

It is important and welcomed that the opposition, in a show of bipartisanship, are in fact supporting these bills. But I must say that the public sitting in the gallery today during question time would shake their heads if you said that both sides of the House were cooperating and that there was bipartisanship on the measures that were announced on 12 October and on the further measures that were announced on 14 October. Quite simply, what we saw today in question time was the opposition behaving—as they have behaved all this year—totally inconsistently. They speak about bipartisanship but then waste question time doing exactly the opposite. It is pleasing that they are going to support these bills, and we hope that the kind of display that we saw in question time today will be something of the past.

I will now go to some of the specifics of the legislation that is before us. The guarantee will cover all deposits in Australian owned banks, Australian subsidiaries of foreign owned banks, building societies and credit unions. The regulators advise that Australian deposits covered by the guarantee on deposits are estimated to be in the order of $800 billion. Deposit-taking institutions are required to hold sufficient capital against their deposit liabilities, and depositor preference means that depositors already have first call on an institution’s assets in the event that it fails. This means that it is highly unlikely that depositors’ funds would not be recovered through the liquidation or failure of an institution.

Because of regulation, the supervision of APRA and the way in which our banks have been operating, it is highly unlikely that an institution in Australia would fail. But, in the unlikely event that that does occur, what this legislation is about is making sure that, rather than waiting for those funds to be recovered from a failed bank, the government will step in and cover those deposits in the first instance so that depositors have access to their money. The government does not expect that it will be called upon to pay for these guarantees. As I said, our banks are strong and well capitalised. Deposit-taking institutions are required to hold capital against their deposit liabilities and, as I have said, depositor preference means that depositors have first call.

In terms of the wholesale-funding guarantee, the Prime Minister recently announced that the Australian government would guarantee, by application, wholesale term funding by banks. Other governments have done this with their banks, which in many cases have poorer credit ratings than our banks. We have had to act domestically to ensure that our banking institutions are not disadvantaged in accessing global wholesale capital markets. As the Prime Minister has said, these measures are necessary to help unclog the arteries of the global financial system.

By offering the wholesale-funding guarantee, the government is ensuring that Australian banks, credit unions and building societies are not placed at a commercial disadvantage in international credit markets. A guarantee will only be applied to individual transactions following application from an eligible institution and the receipt of a fee. Our banking system is one of the strongest in the world and the likelihood of the guarantee being drawn upon is very, very low.

We are in unprecedented times in relation to the actions that governments need to take. We have seen from the Rudd government decisive action, bold action, a plan that goes to the heart of the issues that are plaguing the global community. The government is making sure that the financial sector in Australia is in the best possible situation it can be to meet those challenges as they flow through the economy.

I would like in particular to talk about the $10.4 billion that was announced yesterday in relation to the economic package to stimulate the economy. This is further decisive action by the government that makes sure that we are stimulating growth in the economy. It makes sure that those people who are hurting and have found the current economic times the hardest to deal with are given, in relation to pensioners, carers and low- and middle-income families, a cash injection so that they can have access to money that they need. That money will also provide a much-needed stimulus to the economy to ensure that Australia, unlike many of our OECD counterparts, unlike those countries that are close to recession or in recession, continues to maintain the strong growth that we have had in the past and expect to continue to have.

This government has acted decisively; it has acted boldly. The legislation that is before the House is part of that. It is about providing confidence to the financial sector. It is a series of bills that should be supported. It is good that we have some bipartisanship in relation to these bills from the other side of the House. I urge those opposite to make a more positive contribution in relation to the bold and decisive initiatives that the Prime Minister has announced. I commend these bills to the House.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

by leave—I move:

That standing order 76 be suspended for the duration of the first speech by the Member for Mayo on the second reading debate on the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill.

And I wish him good luck.

Question agreed to.

Order! Before I call the honourable member for Mayo, I remind honourable members that this is his first speech. I therefore ask that the usual courtesies be extended to him.

Jamie Briggs (Mayo, Liberal Party) Share this | Link to this | Hansard source

Mr Speaker, I rise in this chamber today humbled by the honour and the significance of representing the people of Mayo in the federal parliament. In the shadows of a political giant I stand here as the second person to represent this great electorate. It is appropriate to pay tribute to my predecessor, Alexander Downer. I thank him for his tremendous guidance and friendship, recognise him for his unfailing commitment to his electors and honour him for his outstanding contribution to the foreign relations of our country.

To the people of Mayo I undertake that my commitment to their service will always be my principal responsibility in this place. Many would be familiar with my electorate, spreading as it does through large parts of suburban and rural South Australia, including some of the best wine country in the world. You would know that Mayo contributes to the nation’s food bowl with dairy, beef, sheep, apples, pears, cherries, smallgoods and cereals. It is an area of considerable beauty, with many internationally recognised tourism locations. It has some of the fastest-growing towns and rural cities in Australia, creating familiar challenges with planning, services and infrastructure.

Of course, you would have seen the courageous communities on the Lower Lakes making news recently, as they face up to the crisis which bedevils the Murray-Darling Basin every single day. This is a crisis that should not be beyond the wit or ability of a practical and innovative people to fix. The River Murray is a naturally replenishing resource that we must be able to use for food production. But, because of many years of overallocation, excessive regulation, poor planning by successive governments and a once-in-a-generation drought, the system is now at a crisis point.

What has become clear to me is that the time for blaming each other is over. For too long the system has suffered because of continued conflict: state against state, Liberal against Labor and, more recently, Labor premier against Labor premier. What those in authority have failed to appreciate is that bickering between us has been viewed as juvenile by those who elect us. What is needed is a national leadership that is above politics. It needs a plan like the Howard-Turnbull plan released in 2007. That plan was visionary because it addressed the big issues in the system: infrastructure investment, water buybacks, structural adjustment and the management of the whole basement. We must treat the basin as one system, we must invest in water efficiency, we must tackle the problem of overallocations in a coherent manner and, most of all, we must help communities to adjust to the new reality. If we do not, the Lower Lakes in my electorate will reach the point of no return.

The unsatisfactory agreement from COAG will not achieve the necessary reform. While it endorses most of the Howard-Turnbull plan, it is too slow in its implementation, and it still allows the states to preserve their own interests against those of the basin. In this regard, installing a new weir and flooding the Lower Lakes with seawater would be an environmental and social catastrophe. My colleague in the South Australian parliament, the member for Hammond, recently delivered an outstanding speech on this issue, debunking the specious arguments for the weir and with them the myth that has developed in relation to evaporation from the Lower Lakes. Importantly it also debunks the falsehood that the Lower Lakes were once a saltwater environment. A weir is not a solution; it is an admission of failure.

We must also remember that this crisis is not just an environmental crisis. It affects real people. It is our responsibility, therefore, to ensure that the people affected by this crisis receive the same attention that we are prepared to afford the environment. The truth is that the communities on the Lower Lakes need a hand. Therefore, in the spirit of bipartisanship, I have today written to the Prime Minister requesting that he personally intervene to assist the communities on the Lower Lakes to get through this crisis. These are proud Australians who deserve our support.

I come to this place determined to do my part to make the best country in the world an even better place to live. Mine is a typically Australian story. I was brought up in Mildura in a loving middle-class family. My father, Peter, worked for the Commonwealth Bank and my mum, Jan, stayed at home to raise the family. I moved to Adelaide following year 12 to pursue dreams of playing cricket for Australia. What I was quick to learn, however, was that my ability was no match for my enthusiasm and that I was destined to follow a different path.

I was drawn to politics because I realised that the only way to have an influence on Australia’s future was to be involved. I have always known the love of my parents and their unfailing belief in my sister and me. I will always be grateful to them and for what they taught us. They taught us the absolute importance of family life, that hard work and making the most of your opportunities will bring rewards and that Australia is the best country in the world, with a stable system of government and strong, enduring institutions. From them and from my own experience I have found that we are a country of abundant opportunity—where anyone willing to have a go can reach for their potential.

But, if we are to keep our place in the world as a country that punches well above its weight, we must continue to face up to our challenges. Our most immediate challenge is to keep our economy strong in a period of incredible financial turmoil. This challenge puts at risk the security of our national economy, as well as the ability of families to meet their monthly mortgage payments. But it is a challenge we are well placed to confront, thanks largely to the tough decisions taken by John Howard and Peter Costello over the previous 12 years. So to every opponent who would have defeated me by my association with the policies of the former Prime Minister, may I express my gratitude and humility for this legacy: two million new jobs, the lowest unemployment rate in generations, significantly higher real wages for workers, a government that is now debt free and in surplus—delivered in the face of senseless opposition—a people now less dependent on the state and more self-reliant and an Australia proud of its history and its place in the world. Mark my words: the further time passes from the period of the Howard government, the more clearly we will see its legacy and yearn for an administration of its equal.

I have always admired politicians who stand by their beliefs. British author Andrew Roberts describes a statesman as someone who, in the face of a general election, stands by an unpopular policy because they believe it is in the best interests of their country. Through history these statesmen are well remembered: Winston Churchill, Harry Truman, Margaret Thatcher, Ronald Reagan and Tony Blair, to name a few. They are lionised now but were bitterly opposed in their time. History will judge John Howard in a similar way. Whether it was standing up on gun control, modernising our tax system, intervening in East Timor, standing by our allies in the war against terror or reforming the workplace relations system, John Howard did what he believed to be the right thing for Australia’s future.

Of course, reforming Australia’s workplace laws will be remembered as one of the factors in his government’s downfall, but what is ignored and forgotten is that the system that operates in this country today is a world away from the workplace system that operated in 1996—much to Australia’s advantage. No longer is the Australian economy held to ransom by wildcat strike action. No longer are the wharves controlled by a group of militants who made our waterfront the laughing stock of the world. No longer are Australian workplaces bullied by uninvited third parties. The heavy lifting on reforming Australia’s workplace laws has been done. This country is a more productive place because of John Howard’s workplace policies, so much so the new government is barely changing them!

While it is right for us to honour the legacies of John Howard, Peter Costello and Alexander Downer, who delivered a golden age in Australia, it is now time for the next generation of Liberals to stand up. The Australian people decided last November they wanted a fresh approach, and we must learn the lessons of that defeat and rebuild. But Australians cannot afford for us to sit on this side of the House for any longer than is absolutely necessary. I believe we must return to our core values, take from the very best of the previous government and set ourselves policies for the next Liberal administration. I am a Liberal because I believe in the importance of family as the cornerstone of our lives. I am a Liberal because I believe in the value of small business as the engine room of jobs. I am a Liberal because I believe in the role of personal responsibility and self-reliance in our society. And I am a Liberal because I am proud of my country and its place in the world.

While we are in opposition we should not be pale imitations of the Labor Party in government, and we must not be afraid to take on battles on unpopular issues if we consider our position to be right and in the interests of Australia. It is vital for Australia that the opposition evaluates major policy changes on merit and not on emotion. In this respect, the planned introduction of an emissions trading scheme will be a key test for both sides of this House. I believe this debate risks being hijacked by extremists who are intolerant of a range of legitimate views. Australia has a proud tradition of avoiding extremism in policy development. It is one of the reasons our country is so strong. But we are diminished as a nation if we are to persecute those who dare raise doubts about the assumptions behind the current discussion on climate change. This is, indeed, a vital debate—but let it be open, where views are encouraged and respected and a critical evaluation of all the facts is encouraged. For what it is worth, my view on this issue is that we should do what we can to reduce our impact on the environment.

I want my children, Elka and Henry, and future generations of my family to grow up in an environmentally sustainable world. But I also want an honest debate that considers the impact on our economy and the working lives of ordinary Australians. It seems to me that the worst thing we can do is to overreach with our approach to this issue and make little difference to the climate but destroy our economy and our future. This should not be used—as it has been—as a tool of political bludgeon by one party against the record of another. That is why I am so concerned about a government that says it is serious about addressing climate change but in the budget cuts a subsidy for the solar panels because the scheme was supposedly overheating and about a government that says it is serious about addressing climate change but for factional and ideological reasons refuses to sell uranium to India. This is a serious issue and a serious challenge for Australia and the world. We must work overtime to get the big-polluting countries to agree to a plan for the future. Without such an agreement next year, anything we do will be of limited consequence. Hopefully this is the reason our Prime Minister has clocked up so many frequent flyer points this year!

I have the same realistic view of national security that I do of the environment. In particular, I believe we should not for a moment assume that because episodes of terrorism on Western soil have reduced we are immune to attack. We must be aware of our international responsibilities in the war against terror and be ever vigilant on our homeland. We are right to play a significant role in the war against terror, we were right to stand by our allies and we were right to fight for a victory. I pay tribute to the men and women of the Australian Defence Force for the job they are doing for us in Afghanistan, Iraq and the other countries where they are stationed. I honour all our service men and women, just as I honour the contribution of those Australians—including my grandfather—who served our country and in so many cases made the ultimate sacrifice to protect our way of life.

The reality in today’s world is that borders mean less than they have at any time in the past. The internet is the great enabler of our time. It has indeed flattened the world. It is a tool for commerce that will drive economic growth. It is a tool for education that will help our children learn. It is an essential tool in our modern society. I believe that broadband must be reliable and it must be available at a reasonable price. Mr Speaker, broadband is also a vital educational tool. Young Australians are very fortunate to have a well-funded and accessible education system with reasonably high standards. It is one of the key pillars in keeping Australia ahead of the world.

But this may not always be the case. Our competition in a globalised world has learnt from and invested in education. Thomas Friedman in his bellringing book, The World is Flat, highlights the need for Western countries like Australia to improve their education systems to stay in front of the pack. This investment must begin at early childhood and stretch through to higher education. It means creating a system based on reward for effort and reward for achievement.

Reward for the better performing teachers is important. Performance pay for our teachers must be a road travelled for policy makers in the coming years. Our education system must also reward children who do well. I believe there should be well-designed programs to help fast-track bright kids. Equally for those who wish to pursue trades, this should be encouraged with specialist technical colleges. This government is making a big mistake by walking away from technical schools, just as Labor did in the past. Our education system must be dynamic enough to bring out the best in all our children.

Mr Speaker, the work and family balance is a further challenge that will continue to test policy makers. I am an unashamed supporter of the baby bonus and of family tax benefits, because families deserve our encouragement and support. As a country we need a higher birth rate and I have little doubt that recent increases in the birth rate have been due in part to these policies. Paid maternity leave is already a significant part of the equation in the modern workplace, but where the federal government can do more is to fill the gap in the small business area. For businesses with fewer than 100 employees it is very difficult, if not impossible, for them to provide paid maternity leave. I believe the government should develop a scheme to assist workers and businesses in this bracket, leaving larger businesses to continue to build in paid maternity leave in workplace agreements. But whatever policy the government settles on, it should not under any circumstances harm small business or discriminate against those mothers who choose to stay at home and raise their children.

Mr Speaker, we on this side of the House take an optimistic view of Australia’s future. We have challenges but they should not be beyond our wit to fix. We have a sound political system and in that respect I pay tribute to the Australian Electoral Commission for the way in which they conducted the recent by-election in Mayo. We are well served by our Electoral Commission and their independence is a fundamental strength of our democracy.

However, I believe there is an immediate challenge for our democracy. We are witnessing in present days the US election campaign where millions upon millions are being spent by both sides. I fear that our system is heading down this track at a rapid rate, raising doubts in our electors’ minds on the integrity of large donations. I share the concern of the member for Cook that our country needs to address the funding of election campaigns. I also consider we must strive to do better in this place. I believe the Australian public is sick of endless reviews and ‘political speak’. It is time to govern rather than manage.

In conclusion, Mr Speaker, I would like to take the opportunity to acknowledge several people. As all of you in this House know, we do not have the opportunity to represent our electorates without a loyal band of volunteers assisting us. In that respect I pay tribute to all the Liberal Party members and volunteers in Mayo who helped deliver the opportunity for me to sit in this place. In particular I thank Jeff Mincham who was my campaign manager and whose efforts went far beyond what was expected. By-elections are always difficult to run and win and in that respect I acknowledge the assistance of John Burston and the Lib team at Liberal Party headquarters. Also I thank Nick Minchin for all his advice and hard work during the campaign and all my other state and federal colleagues who worked so hard to ensure my election.

I have been extremely fortunate in my time in politics to be exposed to several brilliant political minds. In particular I acknowledge Rob Lucas, for without his support and guidance I would not be here today, and John Howard, the best Prime Minister this country has ever had and someone I was privileged to serve for three years. To all of my friends who have journeyed here today from far and wide, thank you, and to others who could not join us today I also express my heartfelt thanks.

To my mum, dad and sister, Kate, thank you for so very much. My sister is achieving significantly in her own right and I am very proud. Mum and Dad have always been my biggest fans—and in Mum’s case, most vocal of fans—and without their guidance and support I would not be standing here today. I thank my in-laws, the Fiebigers, Noel, Claire and Toyah, for all their support, particularly in recent months.

And finally, I thank my children, Elka and Henry, who have brightened our lives, and last but certainly not least, my beautiful wife, Estee. I am indeed the most fortunate man alive to have found my best friend to share my life. Without her support, encouragement and occasional tempering of some of my less well-thought-through ideas, I would not be half the person I am today. It is an enormous honour to sit in this place. I shall never forget nor disregard the enormous faith the electorate of Mayo has placed in me and I will do my best every single day to make Mayo and our country an even better place to live. Thank you, Mr Speaker.

Sid Sidebottom (Braddon, Australian Labor Party) Share this | Link to this | Hansard source

I congratulate the new member for Mayo on his entry to the House and on his speech. We live in troubling times, and this government has been seeking and will continue to seek to manage responsibly and in a preventative way what is increasingly becoming a serious economic problem both here, certainly potentially, and elsewhere throughout the world. We handed down a responsible budget in May this year and in that process, through savings, attempted to bring together an important and sizeable surplus and to do that responsibly.

More recently, in the wake of the downturn in the world economy and to try to act in a pre-emptive way, this government has made some decisions. One was to guarantee the savings deposits and mortgages of Australians for at least three years, when that will be reviewed, to give them confidence and also to give those banks and lenders confidence and to give those overseas confidence to invest in and borrow from Australia. At the same time, as announced most recently by the Prime Minister and the Treasurer, we have put together a $10.4 billion Economic Security Strategy for the future. I suspect that the word ‘security’ in this case is most correct. It is something that affects us globally, it affects us regionally and, most especially, it has the potential to affect our economy. What we seek to do responsibly, conservatively, diligently and, in this instance, decisively is to try and retain confidence internally and externally in our economy and to give confidence to Australians who operate, work and live in this economy. To do that we introduced five elements, which this House is familiar with and the Australian community is becoming more familiar with as it is disseminated.

In the time remaining to me in this debate on the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008 and cognate bills, I would like to highlight some of those elements to the House and give them some relevance to my electorate of Braddon. I come from a region of around 100,000 to 110,000 people. Those figures include some people who are in neighbouring electorates as they are figures for the discrete region. I estimate, from the number of first home buyer grants allocated in 2007-08 in Tasmania, that 800 grants for either first home or first new home buyers, to the value of between $2.8 million and as high as $4.5 million, will flow to my electorate as a result of the introduction of the total $1.5 billion investment to help first home buyers purchase a home. In addition, with 9,574 families in the electorate of Braddon who receive family tax benefit schedule A, with some 18,659 eligible dependant children, I estimate there will be a one-off stimulus of nearly $19 million to the economy. Finally, through this element, with 33,574 people or couples who receive a variety of pensions and entitlements, I estimate that inclusively around $70 million will be injected into my regional economy because of the Economic Security Strategy announced by the Prime Minister and the Treasurer. That is a sizeable stimulus in a region of about 100,000 people. Of course, if you multiply that across Australia that is the type of stimulus that we are encouraging. Hopefully, that will give confidence to our local communities, to those who produce, to those who sell, to those who buy, to those who invest, to those who save, in addition to the economic activity that is now taking place. We are also seeking that it acts as a stimulant in the wake of a potential downturn in the economy.

I mentioned there were five elements in the package. There is $4.8 billion as an immediate down payment on long-term pension reform. It is a down payment, not the only payment. It is a one-off payment that includes many more pensioners and entitlees than was mentioned by the opposition in their earlier politicking on this issue. I speak of age pensioners, disability support pensioners, carer payment recipients, wife and widow B pensioners, partner and widow and bereavement allowees, Veterans’ Affairs service pensioners, veterans income support supplement recipients, Veterans’ Affairs gold card holders eligible for seniors concession allowance, those of age pension age who receive parenting payment, special benefits or Austudy, and eligible self-funded retirees holding a Commonwealth seniors health card. In addition, people who are receiving carer allowance will also receive $1,000 for each eligible person being cared for. What we are looking at is making available a lump sum payment of $1,400 to singles and $2,100 to couples who will benefit. As I mentioned earlier, as part of this, lump sum payment will be extended to disability support pensioners. That is a comprehensive investment and a comprehensive stimulus to people who need support at this time. They have always needed support—we do not doubt that. It is a down payment and I look forward with my colleagues—and hopefully with all in this House—to the review that is currently being out carried out on pensions and other income taxation reform by Dr Henry and his crew.

I also note that approximately $407 million in total will be paid in the fortnight beginning on 8 December to all Department of Veterans’ Affairs service pensioners, income support supplement recipients, Commonwealth seniors health card holders and gold card holders, including war widows over service pension age who receive the seniors concession allowance or utilities allowance. Around 4,000 people receiving a benefit from the Veterans’ Children’s Education Scheme will also receive a one-off payment of $1,000. So this is a very considerable stimulus to those in need. And Australian families will receive $3.9 billion in immediate financial support as a one-off payment of $1,000 for each eligible child in their care. Families who receive family tax benefit A and families with dependent children who receive youth allowance, Abstudy or a benefit from Veterans’ Children’s Education Scheme payments will also receive that one-off payment.

I am really pleased that this government is able to further stimulate the first home owners scheme in an amount of $1.5 billion. First home buyers who purchase established homes will have their grant doubled from $7,000 to $14,000. First home buyers who purchase a newly built home will receive an extra $14,000 to take their grant to $21,000. I also note that we will be doubling the Productivity Places Program from $57,000 to $113,000 in 2008-09. That will take the government’s total investment in training places since April to more than $400 million.

Finally, we wish to fast track our nation-building agenda to help shield Australians from the global financial crisis. We will look to the opposition in this moment of bipartisanship, which we are being offered, to bring forward projects related to education research, health and hospitals, transport and communications. I commend the government for taking this initiative. It is done responsibly. It is done with a sense of urgency because that is the situation we face. I am sure that, put together with our responsible budget for 2008 and with the guarantee of deposits and mortgages to support our banking system, it will give confidence to the Australian community, it will show the world that they can have confidence in us and that we too have confidence in our institutions and in our economy.

Joe Hockey (North Sydney, Liberal Party, Manager of Opposition Business in the House) Share this | Link to this | Hansard source

These are unique and somewhat troubling times for leaders and economies across the globe, particularly in the Western world. It must be recognised that Australia remains one of the few countries that is well placed to withstand not only the financial crisis but also a crisis that is rapidly becoming an economic crisis and, God forbid, perhaps even a security crisis around the world.

We are placing our trust in the government, given that they are not providing us with the evidence upon which they are making decisions. We are placing our trust in the government’s decision making through our bipartisan support for the initiatives announced on Sunday relating to financial markets and the initiative announced yesterday of the $10.4 billion package. They receive bipartisan support based on trust. The Prime Minister gave a pledge to the Australian people before the last election that he would only deliver evidence based policy and yesterday and today the Prime Minister has failed to answer questions in detail. Indeed, he tends to give more detailed answers at press conferences than he does in this place.

I would have thought that the Prime Minister, in a moment which he describes as ‘a national crisis’, would have come to this place and spoken on the record about such a significant thing and would have encouraged the opposition to support perhaps even a motion, jointly passed by this place and the Senate, supporting the initiatives of the government. So far we have seen the Prime Minister on television last night addressing the nation in a lengthy speech and at the National Press Club today, but as yet he has not come into this place. With the expectations that a member in this place will speak the truth and that the words spoken in this place will be on the record forever, you would think that the Prime Minister would have come in here and spoken, not just to explain the package announced on Sunday but also, significantly, the $10.4 billion package.

Today in question time I asked the Minister for Finance and Deregulation two questions relating to previous words he had uttered in relation to the first home owners scheme, not because we oppose the initiative in the $10.4 billion package but because barely a year ago the Minister for Finance and Deregulation condemned the first home owners scheme as an initiative that would ‘be counterproductive, would tend to feed straight into prices’. Therefore, we asked the legitimate questions that may not be asked by others about what underpins these very significant policy decisions of the government at this critical time. Is it advice from Treasury, advice from the Reserve Bank or advice from the prudential regulator? Does the government know something, when it allocates that much money in one year, something it is not sharing with the Leader of the Opposition, let alone with the rest of the Australian people?

So we have placed our trust in the government, but the government has refused to place its trust in this parliament. Specifically in relation to the package of initiatives relating to the financial markets announced on Sunday, which is the guarantee of wholesale funding and deposits, we support the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008 and cognate bills and await advice from the government about whether the guarantee of wholesale funding requires legislative support.

Of course, when you enter into a market as a government, as the 800-pound gorilla in the marketplace, it does distort the market. In this case, there is limited liquidity in a number of financial markets, and as that liquidity dries up—and in many cases if you can access credit it is enormously expensive—then there is a role, where there is market failure, for the government to step in.

As of this time, let it be very clear to all of the people of Australia that the government has advised this place that there is no financial institution in Australia that is in distress. There is no authorised deposit-taking institution in financial distress. We would hope that that would be the case. As a former minister for the prudential regulator, APRA, I am familiar with all the changes that they have gone through and recognise that they are a much better organisation today than they were when they were initially formed. It is also the case that APRA, the Australian Securities and Investments Commission, ASIC, and the Reserve Bank, with its new-found independence which came about because of the decision of the previous government—those three major regulators which were borne out of legislation introduced into this place and passed in this place by the Howard government—are doing a fine job.

However, I also recognise that the regulators from time to time do make mistakes, and therefore no-one should be above questioning. No-one—no regulator, no government, no institution—should be above questioning. Therefore, we do ask legitimate questions about the guarantee of wholesale funding. Will there be a transparent and open pricing mechanism, not only so that the market can see what the government is charging for that guarantee but, importantly, so that taxpayers can see the price of the government guarantee, which becomes a contingent liability for every taxpayer in the country?

It is also vitally important that there be proper pricing mechanisms that ensure that the guarantee does not become, as John Stewart said, the teat upon which financial institutions in Australia rely. That would undermine the confidence of the financial markets on a longer term basis, which I think the whole package is designed to alleviate. That is one of the reasons why the Leader of the Opposition quite rightly sought to lay down in a motion before this place the principles upon which you can rebuild confidence, not only in Australian financial markets but across the Australian economy.

If you have a financial crisis, if you have a drying up of liquidity in the credit markets, you can be sure, Madam Deputy Speaker, that the cost of funds to those most vulnerable will become more expensive. The cost of funds to those that the banks deem to be riskier borrowers, such as farmers, small business people and so on, becomes more expensive. Only part of this initiative helps to address the drying up of liquidity in parts of the Australian market—and ultimately, of course, the drying up of liquidity in global markets needs a global response. But the reason why we laid down the principles is that, when you have a crisis—be it a security crisis, a financial crisis or an economic crisis—you need to have some basic principles that guide you through uncharted waters. We are unsure what the principles are.

Today we heard the Prime Minister talk about greed. At various times we have heard him talk about the need for more regulation. We do not know what that is. We do not even know what the evidence is for his $10.4 billion package. We do not know what the direct evidence is that justifies that package or justifies the form of the package announced on Sunday. We do not know, so we are placing our trust in the Prime Minister. The principles that we laid down are a sound public balance sheet, low levels of public debt, low unemployment, a flexible labour market and sound corporate and prudential regulation.

The fact is that it is important that this parliament reaffirm its confidence in the private sector’s ability to provide broad financial services to consumers and to businesses large and small. That is essential, because in Britain, with a cheer squad of left-wing Labour MPs, they have had to step in and take over or take equity in a number of banks, as they are doing in the United States. There is no suggestion that that would be necessary here, because Australian banks, we are advised by the government, remain well capitalised.

But it is also the case and must be recognised that there are risks in any reaction of a government, and therefore, in order for us and particularly in order for the Australian people to see beyond the headlines of the day, it is vitally important that we understand why the government has committed to a massive stimulus of one per cent of GDP at a time when the Prime Minister stands in this place and says that economic growth will continue to be two per cent this financial year, that it has a ‘2’ in front of it. It seems a little bizarre and we certainly want to get to the bottom of that.

If Australia had a projected two per cent growth figure this current financial year a week ago, a month ago and beyond, then what events occurred between Wednesday and Sunday to justify the biggest individual fiscal stimulus outside of a budget in Australian history? What justified it? The Prime Minister is not saying, and yet the Prime Minister went on TV and said he is levelling with the Australian people. He went to the press club today and said he is levelling with the Australian people. He does not come into the people’s parliament and say he is levelling with the Australian people, but he goes everywhere else and says it and then is beyond questioning about what his motivations are for such a large fiscal stimulus.

We support this bill. We support it essentially on the basis of trust—we trust that the government knows what it is doing. Over time we will get the evidence of whether this reaction was justified, and I hope that this reaction, this $10.4 billion package, is justified because, if there is no evidence to justify a massive fiscal stimulus, we will all pay a very significant price.

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I rise in support of the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008 and cognate bills that are before the House. Before commencing my comments on the substantive items contained within these bills I will address the comments just made by the member for North Sydney. We have heard about bipartisanship. In fact, one allegation being made is that the Leader of the Opposition has been prepared to walk both sides of the street. We just saw the member for North Sydney not even prepared to cross the street to come onto our side. If his support of this package and the range of measures that this government has acted so decisively on were any more qualified, it would have been outright opposition. Shame on him. At this time of global economic crisis we have someone on the other side failing to really enter into the spirit of bipartisanship that the Leader of the Opposition has promised.

The member for North Sydney expressed outrage that the $10.4 billion stimulus package would be made without there being any more substantive evidence presented to the Australian people. I have to ask: where was the member for North Sydney when the $10 billion water package was announced under the former government? That package did not even go to cabinet. I can understand why he—one of the cabinet members who were shown the great discourtesy of not having seen any details of that proposal before it was announced publicly—might not want to reflect upon that, but to come into this place and criticise this government for not showing the parliament the courtesy of complete access to the information necessary in order to make decisions on this bill is beyond the pale. This Prime Minister has shown the member for North Sydney more courtesy than the former Prime Minister showed him as a cabinet colleague.

Let me turn my attention to the substantive elements of these bills. The crisis we have seen emanating over the last year that has reached a more dangerous and difficult phase in recent weeks is both a crisis of confidence and a crisis of liquidity. Liquidity is a problem and the crisis in liquidity cannot be resolved until the crisis in confidence is addressed. What we have seen in recent times in financial markets and stock markets across the globe—the decline in equities and increased spreads in credit markets around the world—is largely reflecting that lack of liquidity and lack of confidence.

On Sunday the Prime Minister announced a three-point plan to address some of these elements of confidence and liquidity. In those three points we saw the announcement of guaranteed deposits. This built upon the earlier announcement by this government on the establishment of a financial claims scheme with a cap of $20,000. It was increased to an unlimited amount of money to ensure that Australians right across this country know that their funds are safe. I did not get any sense that there was an impending run on the banks, but that is the importance of acting decisively and heading off the uncertainty and fear that could occur as events move so fast right across the globe. It was decisive action that sent a very clear message to all Australian deposit holders and general insurance policy holders that their funds and policies would be safe.

We heard from previous speakers that there has been a belief in the community that a guarantee of this sort already existed, and I think that is probably right. So as the spotlight inevitably began to shine on this issue the only way for this government to ensure confidence in our banking system, to ensure that each individual, corporation and entity that has funds on deposit with banks has the certainty that their funds will be protected, was to make sure that there would be a guarantee. This legislation goes a long way towards achieving that.

I mentioned that this was one point in the three-point plan. I see this as being like a triple bypass. We had some clogged arteries and the lack of liquidity throughout our financial system needed to be unclogged. In the three-point plan the first measure is the guarantee on deposits. The second measure relates to a guarantee on wholesale term funding for authorised deposit-taking institutions, including Australian banks, credit unions and building societies and Australian owned subsidiaries of foreign banks. I will come back to the second measure in a minute because that is the critical one that addresses the issue of confidence that has stymied liquidity, particularly in interbank lending.

The third measure is providing those financial institutions outside of the net of the authorised deposit-taking institutions with some assistance to ensure that they remain viable, competitive and able to participate actively in the marketplace to ensure competition. Those non-bank lenders, in particular the non-ADIs, the mortgage originators—those who have traditionally relied to a much greater extent on securitisation markets—have found their business model, their access to funds and their ability to continue to compete and provide competitive pressure against the authorised deposit-taking institutions under threat. The measure in the package announced by the Prime Minister on Sunday in relation to the injection of funds into the residential mortgage-backed securities market specifically for non-ADIs will go a long way towards ensuring the liquidity within that securitised market for the non-bank lenders and ensure that they remain viable and able to put competitive pressure on the banks.

These measures are significant. They are critical. We have seen events across the globe in recent weeks that shake the very foundations of the market economy. There is no question about that. The events that we have seen, including direct equity injections and investments into banks by governments in some of our major OECD trading partners—

Gary Gray (Brand, Australian Labor Party, Parliamentary Secretary for Regional Development and Northern Australia) Share this | Link to this | Hansard source

With bipartisan support.

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

With bipartisan support. These are extraordinary events because these are extraordinary times. That is why the decisive action, which is reflected in the introduction of this Financial Claims Scheme and related measures, is so important in ensuring the confidence that we require in the marketplace so that mums and dads right around this country have the peace of mind to know that their funds are safe and that this government will do its level best to protect our financial system.

It has to be said that our banks are amongst the strongest in the world. They are well capitalised and all the advice from the regulators is that they are in a healthy state, notwithstanding the difficulties in interbank lending and the difficulties in accessing funds in international capital markets. They are in a good position. This is as good a place as anywhere in the world to be. That said, it is important that we take into account the need to provide that confidence. Considering the strength of the banks, it is, we hope—and all the evidence seems to point towards this—a very remote possibility that this guarantee will ever be called upon. But we have to make arrangements and the bills before us provide for some of those arrangements. In particular, in the event of an ADI requiring to call upon that guarantee, there will be arrangements in place to allow a levy to be imposed upon other participants within that marketplace to assist in finding the bailout as and when that might occur.

It is important to note that what is occurring here is not a bailout. It is a range of measures designed to provide confidence and reassurance to people right across our economy that funds will be safe in banks. In the end, what we have seen in recent days in the coordinated efforts not only of our regulators and our government but of governments and regulators in other jurisdictions is decisive action being taken, and we have seen some improvements, albeit that these are very early days, in terms of liquidity in international markets. So we can only hope that as time progresses markets become more liquid, providing banks with the funds that they need to loan to consumers and businesses. In the end, what is occurring in international financial markets might seem like an unreal proposition, but if banks stop lending to each other—if banks cease to be able to access the funds that they need—then they are not able to lend those funds to consumers or do so at competitive and reasonable rates, and the same applies to business. That is why it is critical that these measures be adopted.

In harmony with the other measures that the Prime Minister announced yesterday, with his decisive action in relation to the $10.4 billion stimulus package, these are the very measures that are needed to try and strengthen our national economy and support our household budgets to try and ensure that we are best placed—as well placed as we possibly can be—to confront the looming economic challenges. I support the bills.

Chris Pearce (Aston, Liberal Party, Shadow Minister for Financial Services, Superannuation and Corporate Law) Share this | Link to this | Hansard source

Madam Deputy Speaker, on indulgence, can I just start by welcoming my family to the gallery this evening. It is wonderful to see them here. The Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008 and related bills are important. After all, it has been the Leader of the Opposition who has shown real leadership on these matters, after demanding that the government provide a broad deposit guarantee and shore up Australia’s banks by underwriting wholesale bank funding. So we are pleased that the government now agree with us and have introduced these bills. Mind you, I do have to say that it did take some time for the government to come on side with our recommendations, and it is good to see them finally adopt the Leader of the Opposition’s proposal.

There are three broad objectives of the bill before the House: the guarantee of all deposits offered by ADIs, or authorised deposit-taking institutions; a general insurance guarantee protecting policyholders; and an expansion of the powers of the Australian Prudential Regulation Authority in relation to general insurance. Before the election, the government wanted to disband APRA and merge it with the Australian Securities and Investments Commission. I am sure now, with the benefit of hindsight, that the government is very glad that it did not decide to interrupt the regulatory, business and prudential framework of Australia. APRA, of course, would not even exist if it were not for the coalition establishing it following the Wallace inquiry in 1998. I am sure, Madam Deputy Speaker, that, like me, you could not even begin to imagine the train wreck that would be Australia’s financial service industry today without that essential regulatory role that APRA has performed over the years. The guarantee of wholesale borrowing that is a part of this package has not been presented at this stage. We understand that is awaiting some further advice from the Attorney-General’s Department.

To the first area, the guarantee of ADIs, this is a new element of the ADI deposit guarantee. We already have an early access facility for depositors where depositors in a failed ADI are granted timely access. If an ADI fails at the moment, the process prioritises the deposit of funds above other claims during the liquidation process. However, there are no provisions for the timely release of depositors’ funds. So what this measure will do is allow APRA to speedily dispense deposited funds to customers of ADIs through Reserve Bank of Australia issued cheques or APRA established bank accounts with another ADI. Once the payments are made, APRA will be able to recoup funds expended by way of, I guess, standing in the shoes of the failed ADI through the liquidation process. A levy to retire costs incurred by APRA where the costs are not recoupable may be established. These provisions are subject to review in three years from now and, in the interim, any public ambiguity about the banking system should now be eradicated. Wholesale and retail customers will be covered, provided their institution is an ADI, so we welcome the fact that the government has now adopted our position on banking guarantees.

The next major area is the general insurance guarantee. If a general insurance provider fails, compensation equivalent to the policyholder’s entitlement will be paid. So, as with a banking failure, APRA will step into the insurer’s shoes and dispense legitimate general insurance claim payments. Claims can be existing or arising in the future up to a limit of 28 days post the institution’s failure. Eligibility criteria will be imposed in order to assess the legitimacy of claims, and all claims valued $5,000 or less will be automatically paid. As with banking failures, APRA may establish a levy in order to recoup the irretrievable costs. The other area in these bills, of course, is the expanded APRA powers. APRA will be able to apply to the court to appoint a judicial manager for a distressed general insurer, whose duty is to protect policyholders. APRA’s external administration powers will be enhanced, and compulsory recapitalisations and transfers will be made simpler.

We, of course, support these bills, but that does not mean that we do not have some concerns. I think there are some legitimate questions that the opposition has asked the government. Unfortunately, the government is not happy to answer those questions at this point. Some of the questions we have to ask are particularly in and around the exit to this package of bills. It is important to get the exit strategy right and the process around the exit of these bills in three years time, or sooner, if that is the case. Exiting this range of reforms is just as important as entry into them. We are spending some time making sure that the entry into this package is well constructed, and therefore the exit strategy is very important. We have asked the government to explain that. We also have some concerns in the area of risk and return, particularly the differential and how the government proposes to manage what has been the differential between AA rated institutions and BB rated institutions in risk and return considerations of deposits because now, with the guarantee, they have been taken away.

One of the key areas of concern that I have goes to the prudential regulations. This is a significant change. This is putting Australian taxpayers at risk. With the introduction of these bills, Australian taxpayers will be liable; there will be contingent liabilities for Australian taxpayers. To date, the government has not indicated to the House or to the Australian public any strengthening of our prudential guidelines or frameworks. I think it beggars belief that we could be moving into such a significant area, where Australian taxpayers could be potentially liable in some way in the future, and the Australian government has not indicated in any way to date how it intends to strengthen or enhance our prudential framework. I think that is an area of significant concern. It is a concern that Australian taxpayers should have. They deserve to know how they will be protected, because this is a risk that they will have going forward.

In summary, as indicated by the Leader of the Opposition and other speakers, we do support these bills, as these bills put in place initiatives which we in opposition foreshadowed and which, in the end, the government is enacting. I know that my colleagues will join with me in expressing our continuing concern about the flow-through implications of the continuing global financial crisis, and we welcome the government’s action in this regard.

Mark Dreyfus (Isaacs, Australian Labor Party) Share this | Link to this | Hansard source

As a nation we sometimes face challenges and crises, the causes of which are beyond our control but the solutions to which lie within our reach. In these present testing times, Australia is exposed to the turbulence in the global financial system. It is the responsibility of the government to ensure that Australian families and businesses are protected from this turbulence, and that is exactly what this government is doing. We are acting decisively to safeguard our financial system, to secure the savings and the livelihoods of Australians and to strengthen Australia’s position as we move through this dire financial crisis.

The Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008 before the House introduces measures to implement the announcement made by the Prime Minister on 12 October. This bill establishes the Financial Claims Scheme that will give certainty to depositors. The government has moved to guarantee all deposits of authorised deposit-taking institutions—that is, Australian banks, building societies and credit unions and Australian subsidiaries of foreign owned banks—for the next three years. In addition, the government will guarantee wholesale term funding of Australian banks and other authorised deposit-taking institutions. Given the difficulties in the interbank funding market that have arisen as a result of an increased aversion to risk, and the consequential tightening of lending practices, this move will allow Australian institutions to continue to raise funds overseas to support their operations.

The financial stability package announced by the Prime Minister on 12 October and the Economic Security Strategy announced by the Prime Minister on 14 October are a timely and appropriate response to the unfolding global crisis. The foundations of this crisis are complex. They arose in the context of unusually low real interest rates and high liquidity that resulted in a decrease in the pricing of risk and a resultant willingness on the part of participants in financial markets to take on increased levels of risk and leverage. In addition, financial innovation led to the increased use of newer forms of financial instruments without the capacity to appropriately price risk associated with those instruments. What began as, in the words of the International Monetary Fund, a ‘generally orderly repricing of risk for assets linked to US subprime mortgages’ has turned into a global maelstrom. This is a market correction that has transformed into a global crisis. There are serious implications for the stability of Australia’s financial system and, in turn, for our real economy and the savings and livelihoods of all Australian households and businesses.

Around the world, more than 25 banks have failed or come close to failure and collapse, requiring government bailouts or mergers with other financial institutions. Understandably, there has been growing anxiety among Australian families and businesses that such an event may occur here. The Australian government has now said that, should such an event occur, however unlikely that is, it will guarantee the savings of those families and businesses caught up in such an event. This move is critical to maintaining confidence and therefore stability across our entire financial system. Australian depositors can now feel certain that their deposits are safe.

The reaction of banks to the global financial crisis has understandably been to tighten lending standards and increase the cost of capital. This has implications for the entire financial system as well as for households and businesses seeking to borrow to finance investment. In the current climate, it has become increasingly difficult for banks to raise funds in the interbank funding market. Governments around the world have reacted to the increased anxiety and what the International Monetary Fund has described as an evaporation of trust by intervening in financial markets in a way that would have seemed unimaginable a year ago.

Four European governments have guaranteed 100 per cent of eligible deposits and other countries have substantially increased their deposit insurance caps. These reactions have required the Australian government to move to secure our banks. Australia’s banking system continues to show its resilience despite the threats posed by events beyond our shores. Our financial system remains sound and is amongst the best regulated, safest and strongest in the world. In the words of the Organisation for Economic Cooperation and Development, Australia’s ‘financial sector has withstood the crisis thanks to prudent management, high profitability and strong capitalisation’. However, as the Prime Minister said on 12 October:

We must act now because other governments with weaker banks have moved to make those institutions more competitive than our stronger banks.

That is why the government has acted to guarantee wholesale term funding of Australian banks. To ensure the continued competitiveness of Australia’s mortgage markets, the Australian government is directing the Australian Office of Financial Management to purchase an additional $4 billion in residential mortgage backed securities from those lenders who are not authorised deposit-taking institutions. This decision has been made after close monitoring of the mortgage market and careful consideration by the government. Through the tightening of credit availability, there is the very real potential that this global financial crisis will have an impact on our real economy. The restoration of stability and liquidity to financial markets is therefore of paramount importance.

This crisis is likely to result in a further slowing of global economic growth, in particular in advanced economies. Although we are better positioned to weather this economic storm than many other countries, these times do require a strong response and strong leadership. Because of this government’s prudent financial management in this year’s budget, Australia now has the flexibility to respond to this growing crisis with a range of measures.

The Economic Security Strategy announced by the Prime Minister yesterday will both stimulate the domestic economy and protect all Australians through these difficult times. We are now in a position to protect those in our community who are doing it tough: working families, pensioners and small businesses. The government have delivered relief for pensioners, carers and people with a disability through lump sum payments in the lead-up to comprehensive reform of the pension system. We have been able to provide additional support for first home buyers and to stimulate the residential construction industry. We are continuing to pursue long-term capacity building measures in our economy by creating an additional 56,000 new training places and fast-tracking the three national building funds that were established in this year’s budget.

Through the measures contained in this bill, and through the Economic Security Strategy, we are acting decisively, calmly and in a timely fashion to ensure that Australians are protected through this global financial crisis. It is critical that the opposition also acts in the best interests of all Australians. This government is continuing its responsible, sound economic management to guarantee the continued stability of our financial system and to protect Australian households and businesses. I commend the bill to the House.

Luke Hartsuyker (Cowper, National Party, Deputy Manager of Opposition Business in the House) Share this | Link to this | Hansard source

I can certainly assure the member for Isaacs that the opposition is acting in the best interests of all Australians. We have seen a crisis of confidence in markets, and it is confidence that binds our markets. It underwrites our financial dealings, and financial markets are the lifeblood of world commerce. Average Australians have sat at home watching their television sets and seeing a world financial market in turmoil and they have been attempting to make sense of that turmoil. Over the months they have listened in earnest to explanations of the subprime market and the ensuing international network of loans and will have drawn the conclusion that the great financial edifice that is the world financial system was built on foundations of sand.

The crisis we now face goes back, as we know, to the subprime crisis in the US. To be precise, it was based on loans advanced without sufficient security, without reference to the capacity of borrowers to repay in accordance with the terms of the bank loans advanced and based on the illusion that capital values would continue to rise and rise. It was based on the calculations of financiers who realised they could make a killing without doing anything more than skilfully repackaging debts. As a result of this crisis, the financial security and hard work of everyday citizens of the world has been imperilled by those who have made financial fortunes.

Those people looking on have seen President Bush fight to get his $700 billion bailout package for the financial sector passed by congress. They have seen President Bush spending $250 billion on what amounts to a part-nationalisation of American banks and the UK injecting ₤37 billion into three of its banks. They have seen Iceland turn to Russia for a loan equal to half their country’s GDP. A country that built its economy on a Thatcherite deregulation of its financial sector has now nationalised its major banks. They have seen the former chief executive of the bankrupt Lehman Brothers, Richard Fuld, failing to justify the $500 million he earned since 2000, all for taking that company into financial collapse. They could be forgiven for thinking that the world has been turned on its head. It is therefore not surprising that people look to their own modest finances and ask the question how secure are they. The package of measures that the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008, the Financial Claims Scheme (ADIs) Levy Bill 2008 and the Financial Claims Scheme (General Insurers) Levy Bill 2008 represent will provide a reasonable degree of security. I welcome the package and the speed with which it has been prepared and introduced to this House.

If anyone doubts the wisdom of extending the guarantee, given the strength of Australian banks, let me remind them of the German finance minister, Peer Steinbruck, who said on September 25:

America was the source…and the focus of the crisis.

Within days, his government was forced to step in to save the country’s second-largest property lender, Hypo Real Estate. No sooner had the Governor of the Bank of France, Christian Noyer, declared ‘There is no drama in front of us’ than five European banks had to be bailed out in seven days. This is not to say that our banks are in danger of collapse—they are not—but it illustrates the importance of well-supported confidence-building measures. The lesson might be that, when it comes to a financial crisis, we should judge governments by their actions and not by their words, whatever the temptation to talk up their own economy in an attempt to maintain confidence. To those who doubt whether it is necessary to guarantee all deposits, let me say this is no time for half-measures. The Nobel Prize winning economist Paul Krugman studied the Japanese crash of 1991. He came to the conclusion that the government took only incremental steps to boost the economy and, as a result, ended up with a mountain of debt worth more than the national income as the economy collapsed. As I said, this is about trust, and we need bold measures in place to secure that trust, even if we never have to use them.

Turning to the details of these three bills, I commend the simplicity of these measures. This will, in itself, help restore trust. If an authorised deposit-taking institution, or ADI, goes into liquidation, the Australian Prudential Regulation Authority will appropriate funds to pay depositors. Depositors will receive their deposits and accrued interest within a week of liquidation. Depositors do not need to become a party to the liquidation, nor will they lose their right to make other claims on the institution. The Financial Claims Scheme (ADIs) Levy Bill allows the Commonwealth to recoup any shortfall in meeting depositors’ claims by means of a levy on the remaining banks, the Commonwealth covering the shortfall in the first instance to ensure that depositors receive their funds. The Financial Claims Scheme (General Insurers) Levy Bill provides similar provisions to cover the event of a failure of a general insurer.

Deposits, as I indicated earlier, are less investments than savings. You make a deposit with a bank in the knowledge that you will get that amount back. On top of that, you will get back a return which has been agreed with the bank. They are not a form of speculation. They are, for most Australians, a way of securing money at a modest return. There are no promises of bonuses, dividends or potentially huge returns on the bank deposits of average Australians. They appeal to people who do not have money to risk and who just want to keep their savings safe. The need for safety and security in banking deposits is fundamental to the peace of mind of everyday Australians and fundamental to commerce in this country. I commend the bills to the House.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

Martin Luther King Jr, the famous civil rights campaigner, once said:

The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.

These are times of challenge and controversy for our country. There is a crisis afoot, a crisis of confidence, liquidity and nerve. Following this $700 billion asset bailout by the US congress of the US banking system, I never thought I would see the day, even then, when President George W Bush would go home to West Texas and announce a plan to buy up $250 billion worth of stock in the nation’s leading banks. Never did I think I would see in my lifetime a situation where seven European nations were acting in concert, as they did last Monday, to aid their banks with $US2.3 trillion in guarantees and other emergency measures. We are seeing a coordinated response. Four European governments—Ireland, Germany, Denmark and Iceland—have moved to ensure 100 per cent of eligible deposits, and we are doing the same.

The government is acting boldly and courageously, and the Prime Minister and the Treasurer deserve credit for that. Despite the fact that we have one of the strongest banking systems in the world, we are not immune to what is going on. The IMF’s forecast of growth in 2008 showed an expected growth of 2.5 per cent compared with the average of 1.2 per cent of other major advanced economies. So it is timely that the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008 and cognate bills are before the House guaranteeing deposits in our financial institutions, protecting the savings of Australian people and providing them with a 100 per cent guarantee that their hard-earned savings are safe. This guarantee will apply for three years, after which the government will consider a cap. The bills before the House provide compensation to eligible policyholders with claims they may have against failed insurers as well. The bills establish arrangements to improve judicial and statutory oversight of financial institutions and insurers. They improve arrangements concerning the transfer of assets and liabilities between institutions and they facilitate recapitalisation. The new Financial Claims Scheme will be managed by APRA. In the event of a failure, no longer will bank deposit holders go into the mix with other creditors; they will receive a 100 per cent guarantee that their deposits will be paid back to them. It is a welcome measure, I am sure.

This is an extraordinary time. It is an extraordinary guarantee, and it means about $800 million of Australian bank and financial institution deposits will be covered. It is hoped and expected—the Australian public hopes and prays—that no financial institution will fail. It has not happened in the past and we do not expect it in the future. But we must be cautious and confident in the measures we take. I commend the Treasurer and the Prime Minister for what they have done. It is important that we give confidence to the Australian public in relation to these measures. My office in Ipswich has been inundated with people ringing up and discussing not just the pensioner assistance announced by the government yesterday in terms of its economic security strategy but also the financial crisis.

I welcome also the government’s $10.4 billion economic security strategy, which contains five elements. But I want to focus as I conclude in the few minutes I have available to me on the assistance we are giving to pensioners, carers and those who are doing it tough in our community, particularly disability support pensioners. For so long they have been left out, and so many of my constituents will benefit from the assistance given yesterday. It is expected that nearly 44,000 households in my electorate will receive assistance, getting the kind of help that they need just before Christmas.

I want to finish on this note: I received an email from a fellow called Garry McFadden who lives in Leichardt in Ipswich. He said:

I would like to congratulate the Rudd Government on their promise to give all pensioners and carers a substantial cash bonus this is the first time any government has treated all types of pensioners as equals. Under the Howard government disability pensioners and carers were treated with contempt by the government and Centerlink. I would like to see this Government legislate to make it an offence for any person or organisation to discriminate against disability pensioners and carers.

He is very passionate about this. He goes on, and I think this is probably the attitude taken by a lot of Australians, so I want to finish on this note:

I am the first to criticise any Government or Government organisation that I feel is not doing the right thing—

I think that is a common feeling amongst the Australian public—

but I also believe in giving credit where it is due and I must give credit to the responsible way the Rudd Government has handled the worst economic crises in my lifetime.

I am sure that people in my electorate are saying, ‘That is a terrific response’, and that is quite apt. There would be pensioners and carers throughout the country who, like Gary McFadden, would be saying, ‘Congratulations to the government’, and amen to that. I commend the bill to the House.

Steven Ciobo (Moncrieff, Liberal Party, Shadow Minister for Small Business, Independent Contractors, Tourism and the Arts) Share this | Link to this | Hansard source

These certainly are unique times. No-one, I believe, would have foreseen the extent to which this global economic crisis has rocked global financial institutions. Twelve months ago does not seem that long ago. The world ostensibly had quite a different landscape. Although it was clear, storm clouds were brewing; it certainly was not the case that the extent to which those storm clouds would develop into almost the perfect storm was understood. Speaking in support of the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008 and cognate bills today, as indeed the opposition are, is really a signal that we recognise the importance of this measure of bills and of the government’s stimulus package to provide stability and to help rebuild confidence not only in Australia but as part of that chain of developed countries around the world which have all in recent times experienced a significant erosion of financial stability and economic confidence.

These bills do several things. From an opposition point of view, the coalition certainly initiated this process when we commenced an inquiry when we were still in government to look at developing what was widely regarded by Australians as an implicit guarantee of their deposits into becoming an explicit guarantee. These bills build on those initial moves that were undertaken by the coalition. The unlimited bank guarantee for three years, which expires on 12 October 2011, and the most likely introduction of the cap is the epicentre and the key platform upon which the entire framework of this legislation is supported. The coalition certainly supports this as the central thrust of maintaining stability and building confidence. We also support the review of the scheme in three years time, and it is the opposition’s view that this should ideally be undertaken by the Productivity Commission. The development of this guarantee on bank deposits and deposits in other ADIs is certainly one that we believe is best supported by the introduction of the levy scheme as outlined in the legislation. It means that if there is a failure, the first port of call will be the ADI’s capital, followed by a levy on other ADIs and then ultimately taxpayer initial funding if there is not immediately the adequate amount of capital contained in the ADI or through the levies and also for subsequent repayment.

Although the perfect economic storm has now taken place around the world to an extent not seen before, it is important to recognise that this is of itself not the sole factor. It has been my very genuine concern, which I have spoken about in this chamber for a number of months, that although there are these are large international problems, these problems have been exacerbated in a domestic context by decisions taken by the Rudd Labor government. I have particular concern for those 2.4 million small businesses in Australia that employ around 4.4 million Australians and will find this particular period of time exceptionally difficult. The development of confidence and the importance of maintaining economic stability is certainly fundamental to ensuring that small business in Australia continues to enjoy, as best as is possible in these circumstances, the trading conditions that will help to sustain their business.

But it is also important to recognise that, as much as this debate and this discussion both domestically in Australia and internationally has focused on the need to ensure economic stability, we must not lose sight of the fact that at a micro level we need to recognise the need of small businesses in this country to be heard. We need to ensure that small businesses in this country get their voice across to those in charge of the levers of government, the small business minister, the Treasurer, the finance minister and the Prime Minister. It is of fundamental importance to provide confidence that goes beyond the key economic institutions—the ADIs and consumer confidence in the deposits in ADIs. We need to also deal with the complete erosion of business and consumer confidence that has occurred in Australia to date.

The reality is that a key, fundamental and, I believe, neglected aspect in this discussion by the government has been the government’s role in eroding that confidence. I do not dispute for one moment that the international economic tumult has played a very major part in that erosion of confidence. But let there also be no mistake that this government’s actions in a number of key policy areas have exacerbated the impact on business and consumer confidence as a result of this international economic tumult. Let it not be lost on anyone that small business people across Australia today, while concerned about the international economic factors, are also very concerned about the policies of this Rudd Labor government which are having a material negative, detrimental impact on the running of their businesses.

That is not a partisan political point. It may sound like it, but it is not. It is in fact me being an advocate for the facts as expressed in, for example, the Sensis small business survey. That survey of about 1,800 small businesses in Australia has highlighted that, when questioned directly about the federal government’s policies, small businesses in Australia believe that the Rudd Labor government’s policies are actively working against their small business.

These measures that are contained in the bills before us today will certainly go a very long way towards rebuilding some confidence and toward providing economic stability. That is why the opposition supports them. But let it not be said by the Rudd Labor government that that then means that they can approach this debate with clean hands and claim that the complete collapse of business and consumer confidence in this country is all attributable to international economic factors, because it is not. The international economic factors play a role. But that problem is exacerbated by a government that frankly does not know what it is doing when it comes to small business policies for this country.

One of the key concerns that I hear from small business is their concern about a lack of transparency in the Rudd Labor government. Small businesses do not know who calls the shots in the Rudd Labor government. When the Rudd government was first elected they claimed that they would be open, accountable and transparent. Ahead of the government’s announcement, the opposition called for an increase of the guarantee from $20,000 to at least $100,000, and I am certainly pleased that the Treasurer and the Prime Minister listened; I am pleased that the Labor government adopted the coalition’s policy on that front.

The government said that it would be transparent. But what we have seen as recently as question time this afternoon when the opposition did its job and questioned the Prime Minister on, for example, the economic forecasts upon which this government based its position that $10.4 billion should be spent to help stimulate the economy—when the opposition dared to question the Rudd Labor government about what those forecasts were and the likely impact on unemployment and the business conditions for small businesses in Australia—is that, instead of being open, honest and transparent with the Australian people and with the opposition through this institution, the Rudd Labor government resorted to ridicule. That is why small businesses in this country do not have confidence in this government to deliver the kind of leadership that they are looking for when it comes to the financial and economic management of this country.

I say to the Rudd Labor government on behalf of Australia’s 2.4 million small businesses and on behalf of constituents in my electorate that they need to ensure that their actions match their words. The opposition will provide support and indeed is doing so on these bills and on the economic stimulus package that is being provided to the Australian people. But we will not back down from our responsibility to ensure that Australian taxpayers have scrutiny of the legislation and of the government’s intentions and that they understand, through transparent government, why the stimulus package is the size that it is given the newly revised economic forecasts. It is not good enough for the Rudd government to say that they will not reveal the newly revised forecasts and that we can just wait for them to come out in good time in MYEFO.

I support these bills. I certainly support the economic stimulus—based on the very limited amount of information that the government has deemed it appropriate to release to the opposition and, through the opposition, to the Australian people. But I also reinforce to this Labor government that it is time to be upfront and transparent and to release information about the revised economic forecasts. Most fundamentally, this Labor government must recognise that, through policy decisions that they have taken and that they continue to signal to Australia’s 2.4 million small businesses, they are exacerbating the confidence problems that are a consequence of the international economic tumult and making those confidence problems from abroad even more significant in a domestic economic context. Instead of running away from that fact, the government should acknowledge it, deal with it and provide leadership.

Richard Marles (Corio, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008, the Financial Claims Scheme (ADIs) Levy Bill 2008 and the Financial Claims Scheme (General Insurers) Levy Bill 2008. In doing so, I say at the outset that it is disappointing to hear the contribution that has been made by the member for Moncrieff. It was an admirable thing that we heard the Leader of the Opposition provide his support to the package of measures put forward by the Rudd government in what are extraordinary global economic times, but since then we have seen one opposition member after another—which has been repeated just now by the member for Moncrieff—display a certain meanness of spirit instead of coming to the table and working with the government to try and deal with this extraordinary crisis which the globe is facing and which Australia is obviously facing as part of the globe.

To be honest, what small businesses want, what constituents in my seat want and, indeed, what every Australian citizen wants is for the people who are in this building, in this place, to put aside their party differences and work together to deal with what is an extraordinary situation facing this country. It is a situation which did not begin here—it began in the United States through the subprime mortgages which were being issued in that country—but it is a problem which has now spread across the globe. As the Prime Minister said yesterday:

The truth is that we are going through the worst financial crisis in our lifetime. I’ve described it as the economic equivalent of a national security crisis.

Alan Greenspan a few weeks ago said:

… let’s recognise that this is a once-in-a-half-century, probably once-in-a-century type of event.

He described it as the worst by far in his career. They are very strong words, not from an Australian regulator but from the most esteemed American regulator, about the situation that the world finds itself in. So it extends well beyond the issues which are going on in Australia. Indeed, this is an issue which began in America, which is spreading to the globe and which we need to act upon in this country. To come up with the sorts of comments that we have just heard from the member for Moncrieff is, frankly, very disappointing indeed.

Around the world we have seen 25 banks fail or need to be bailed out by various governments. Indeed, last night the US administration announced that it would seek to invest a further US$250 billion in shares in nine of its biggest banks. Of course, that follows the move that the United Kingdom government announced on Monday to invest £37 billion in two British banks. In fact, in Australia the situation involving banks is much better. The environment here is much better than has existed around the world, but that is why it is so important that, as a government and as a parliament, we act now, decisively and rapidly, to prevent the worst effects of this coming to fruition in Australia. That is what the package of reforms announced by the government, of which these bills are an important part, is doing.

These bills that we see in the House now provide, in essence, for the guaranteeing of bank deposits from Australian depositors in Australian banks, a very important measure indeed. It needs to be explained in a little detail, although time does not permit me to go into an enormous amount of detail in relation to this. It is very unlikely that we would ever see a situation where the money that people have in banks would ultimately be lost, even were a bank to fall over in this country, but if we did see a bank get into trouble and deposits frozen then it might be some considerable time before people access their funds, so what this bill provides is for a scheme to be set up which enables the government to pay out the deposits of the depositors immediately and then to go through the process of recovering the funds from the liquidated bank were that to be the case. That measure, combined with the wholesale funding guarantee for banks, which allows Australian banks to compete for funds on the global money market, and coupled with the $10.4 billion Economic Security Strategy which was announced yesterday, represents a very significant set of measures aimed at trying to put this country in the best possible position that it can be in to weather the storm, and that is exactly what these measures will do.

In the brief time that I have left to me, I want to say something which is particular to my electorate, because I think the people of Geelong have a particular history in relation to this issue which makes the minds of those in Geelong very attuned to what is going on and, in turn, very appreciative of the measures that the government has taken. In saying that, I am referring to the Pyramid Building Society collapse, which occurred in Geelong in 1990. If there is a community in this country which knows the devastating effects of losing its deposits, or at least having its deposits frozen, it is Geelong, because that is exactly what was experienced by so many people in Geelong in the year 2000, when the Pyramid Building Society was wound up with debts in excess of $2 billion. It took people more than a decade to recover the money that they had in deposits in that building society, and the whole Pyramid episode left a lasting scar on the community of Geelong which has taken a long time to overcome. It is really only now, almost 20 years later, that we are properly emerging from that event and from that time. So in a sense I say to this parliament, representing the people of Geelong, that the significance of putting a bill through this parliament right now which guarantees the deposits of people depositing money in Australian banks cannot be overstated. It is an incredibly important measure to take in terms of providing confidence in the system and protections to individual depositors.

So I would very much commend these bills to the House. I would very much commend the package of measures that the government has put forward to deal with this crisis. I see the Treasurer in the House at the moment, and I would very much like to congratulate him on all the work that he has done in what is an incredibly difficult and challenging set of circumstances that our nation faces. I would absolutely call on the opposition, in light of the contribution that we have just heard from the member for Moncrieff—and not just his comments but other comments that we have heard since the announcement yesterday—to put aside all the party differences, to drop all of that rhetoric and to come and work with the government so that everybody in this building is pulling in the one direction to make sure that this country is properly safeguarded against what is an extraordinary global crisis.

Andrew Southcott (Boothby, Liberal Party, Shadow Minister for Employment Participation, Training and Sport) Share this | Link to this | Hansard source

I want to speak on the package of reforms that have been announced in response to the global financial crisis. Particularly I want to speak to the extra 56,000 training places and the $187 million which are part of the package. Like all members of the opposition, I welcome the measures that have been announced for pensioners, for families and for first home buyers. Included in the extra training places are 10,000 places which are structural adjustment places. This is an issue which the opposition has been raising for some time. We have tracked over 15,000 redundancies from companies since the government was elected last November. I think that it is important to make the point that before Black Friday, before the collapse of Lehman Brothers and other banks, there were already obvious problems in the economy. DEEWR’s leading indicator for employment has just been released and employment has now decreased for nine months. That indicates a cyclical downturn in employment.

The Minister for Employment and Workplace Relations came out on Thursday responding to monthly figures which showed unemployment increasing by 21,700, the largest monthly increase in unemployment since January 2001. She said that unemployment was low and basically steady. So we have a minister for employment who was in denial on Thursday about the extent of the problem emerging in employment. We have a Treasurer who decided that fiscal tightening was the way to go in May and fiscal loosening in October. So we have lots of signs of a government that does not know what it is doing when it comes to managing the economy. Having said that, the opposition does welcome the training measures. These measures would have been necessary any way regardless of the global financial crisis. The problem is that the Productivity Places Program had provision for 20,000 places in the first three months and only 22,000 in the next six months. So this is a program which has been centrally planned but not well planned. The Minister for Education is widely recognised as not having much of a focus on training or vocational education. Quite simply, her workload is beyond her. Many training providers around the country have contacted my office with a range of concerns about the way the Productivity Places Program has been delivered, from IT systems failures to the department neglecting to advise providers when 80 per cent of the places had been filled.

In addition, we would be very concerned if this was another cynical Labor attempt to have a training treadmill. The last time a Labor government, through Working Nation, had a problem—in that there were no jobs—people were cynically put on a training treadmill. The opposition would like to know from the government what the employment outlook is. We have asked these questions and we believe that we should know and the Australian public should be levelled with as to what the employment outlook is for the next couple of years. We already know that well before Black Friday, well before the Lehman Brothers, employment was deteriorating. It was downgraded in this year’s budget. The Reserve Bank downgraded employment growth in August and, as I said, the DEEWR leading indicator has now declined for nine months, indicating a cyclical downturn in employment. So the training will be welcome but we are very concerned as an opposition, with only just last month seeing unemployment rise by the highest number since January 2001, at the signs of a government which is not really on top of managing the economy.

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

in reply—I would like to thank those members who have taken part in the debate on the Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Bill 2008, the Financial Claims Scheme (ADIs) Levy Bill 2008 and the Financial Claims Scheme (General Insurers) Levy Bill 2008. I do not have much time because we do need to get the bills through tonight and some time has just been wasted by the previous speaker talking about other bills, which has further contracted my time. The urgency here in dealing with the substantive issues is to actually get the bills through so I will now not have time to make some of the comments that I would otherwise have done given the urgency of these bills.

These bills do represent unprecedented action to deal with developments in global markets and to ensure the stability of the Australian financial system. These bills give effect to the Prime Minister’s announcement on Sunday that the government will guarantee the deposits of Australian banks, building societies and credit unions and Australian subsidiaries of foreign owned banks. In addition to the Financial Claims Scheme, the bills also introduce a number of other measures that will enhance and strengthen Australia’s regulatory framework for managing financial institutions in distress.

We are witnessing a global financial market crisis of historic proportions. Confidence is fragile following the failures of a number of large international institutions, which has caused significant dislocation in global equity and capital markets. Fortunately, Australia’s financial institutions do not have significant exposures to troubled assets in the US or, like US and European financial institutions, to troubled mortgage related assets. This was confirmed recently by the IMF in their Article IV report and by the RBA at its Financial stability review.

This legislation has been made necessary by events external to this country. This is very important legislation and it certainly does deserve the full support of everyone from both sides of the House. It is legislation which is implementing the commitments that we made way back earlier this year. It is legislation that was recommended by the regulatory authorities and that we have discussed with the Australian Council of Financial Regulators. This bill is historic and it comes at a time of the biggest ever threat to the modern market economy. So I certainly welcome the willingness of the House to consider this bill today, for it is vital that we ensure the Australian people can have confidence in their deposits in the financial sector. The measures in this bill will give confidence to ordinary Australians in our financial markets. I commend the bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.